Sleep Country buys Endy for $88.7 million, but the two will operate separately

David Friesema, the CEO of Sleep Country Canada, sits on the new "Bloom" mattress, as he poses for a photo at a store in Toronto on Wednesday, May 10, 2017. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO -- Sleep Country Canada Holdings Inc.'s $88.7 million purchase of Canadian mattress start-up Endy won't mean the two will be amalgamated or that the legacy brand will cease selling products from Endy's bed-in-a-box competitors.

Toronto-based Sleep Country said Friday that the two will operate separately and that Sleep Country won't abandon selling the Bloom mattress-in-a-box that it launched in May 2017.

"Bloom is not going anywhere. We sell it out of our stores and we sell it online and we plan to keep doing that," said David Friesema, Sleep Country's chief executive officer, on a call with analysts. "It is one of our fastest growing product launches we ever had in our history."

Friesema said Sleep Country was interested in buying Endy -- built by two friends that met as high school students in Calgary and disrupted the mattress industry when they launched their company in 2015 -- because of the synergies between the two brands.

Despite Endy and its U.S. rival Casper increasing competition in the sleep products industry, he said the Endy purchase wasn't meant to be a "defensive move."

"We have been watching carefully and we have been talking for awhile," Friesema said. "This is the right time to make the purchase."

Executives said both companies were keen on the acquisition because they will each benefit from it. Endy will be able to leverage Sleep Country's logistics, warehouse and shipping expertise, while Sleep Country will be able to tap into Endy's e-commerce technology and digital marketing prowess.

They said it is unlikely that Endy products will land in Sleep Country stores, though they admitted executives had discussed the possibility but decided to leave the decision up to Endy to make in the future.

Their partnership comes at a key time for both brands. Sleep Country has long been grappling with bed-in-a-box competitors and the growth of e-commerce. It only launched an online sales offering about a year ago and has been keeping an eye on how it can reinvigorate its brick-and-mortar spaces and boost its sleep accessory sales.

Meanwhile, Endy's last year has put it on track to post $50 million in revenues this year, though it has also been challenged by competitors. Casper has aggressively expanded in Canada and is slowly opening retail stores -- a feature Endy has yet to delve into.

Friesema said Endy will continue to evaluate whether it should jump into brick-and-mortar.

"We do test things," he pointed out. "That will probably be more likely than ever being in a Sleep Country store, but there is no decision that has been made 100 per cent on that yet."

Rajen Ruparell, Endy's co-founder and chairman, added that for now the company has been focused on growing its traffic online because 100 per cent of its sales are done through e-commerce.

He also said the 38-employee company was committed to remaining as "lean and efficient as possible," even as it grows.

For now, the companies are waiting for the deal -- $63.7 million in cash paid at closing and up to an additional $25 million in 2021 based on the achievement of growth and profitability in targets in 2020 -- to close and regulatory approvals to be received by Thursday.

"It's early days. We just got married last night and we are encouraging the entrepreneurial spirit between the organizations," Stewart Schaefer, Sleep Country's chief business development officer, said. "The team will come together and look under the covers and see where there are synergies."